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Hungate v. Law Office of David B. Rosen

Supreme Court of Hawaii

February 27, 2017

RUSSELL L. HUNGATE, Plaintiff-Appellant,
v.
THE LAW OFFICE OF DAVID B. ROSEN, A LAW CORPORATION, DAVID B. ROSEN, and DEUTSCHE BANK NATIONAL TRUST COMPANY, Defendants-Appellees.

         APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CAAP-13-0005234; CAAP-14-0000772; CIVIL NOS. 13-1-2146; 13-1-2146)

          James J. Bickerton, John Francis Perkin, Stanley K. Roehrig for appellant

          Christopher T. Goodin, David B. Rosen, Peter W. Olsen for appellee Rosen

          Judy A. Tanaka for appellee Deutsche Bank

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

          OPINION

          WILSON, J.

         This case concerns a non-judicial foreclosure conducted pursuant to Hawai'i Revised Statutes (HRS) § 667 Part I (Supp. 2008), which was repealed by the state legislature on June 28, 2012 by Act 182. Plaintiff-Appellant Russell L. Hungate (Hungate) appeals the Circuit Court of the First Circuit's (circuit court) order granting Defendants-Appellees David B. Rosen's and his law office's (collectively, Rosen) motion to dismiss the complaint. Hungate also appeals the circuit court's order granting Defendant-Appellee Deutsche Bank National Trust Company's (Deutsche Bank) motion to dismiss the first amended complaint.[1]

         On appeal, we consider whether the circuit court wrongly dismissed Hungate's claims alleging Deutsche Bank and Rosen violated statutory, contractual, and common law duties, and committed unfair or deceptive acts or practices (UDAP). We conclude the circuit court erred in dismissing the majority of Hungate's claims. Accordingly, we vacate in part the circuit court's November 5, 2013 order granting Rosen's motion to dismiss, vacate in part the circuit court's April 8, 2014 order granting Deutsche Bank's motion to dismiss, and remand for further proceedings.

          I. Background

         Because the circuit court dismissed Hungate's August 6, 2013 complaint and his first amended complaint, filed December 19, 2013, pursuant to Hawai'i Rules of Civil Procedure (HRCP) Rule 12(b)(6) (2000), we take the factual allegations from the complaints as true for purposes of this appeal. See Young v. Allstate Ins. Co., 119 Hawai'i 403, 406, 198 P.3d 666, 669 (2008). Hungate's initial complaint and first amended complaint included the following factual allegations.

         A. Factual Allegations

         Hungate secured a mortgage loan from IndyMac Bank, F.S.B. (IndyMac), in the amount of $324, 090 to purchase real property in Kalaheo, Kaua'i in 2007.[2] Hungate executed the mortgage on February 10, 2007 and recorded it in the Bureau of Conveyances on February 16, 2007. In March 2007, IndyMac assigned its interest in Hungate's mortgage to one of its subsidiaries, which then assigned its interest to Deutsche Bank.

         To address the possibility of foreclosure, the mortgage contract included a power of sale clause that allowed the property to be sold through a non-judicial foreclosure. The power of sale clause, found in section 22 of Hungate's mortgage, reads in relevant part as follows: "Lender shall publish a notice of sale and shall sell the Property at the time and place and under the terms specified in the notice of sale."

         On August 5, 2008, IndyMac notified Hungate that his loan was in default because he had not made the required payments. On January 14, 2009, an individual acting on behalf of IndyMac[3] executed a notice of mortgagee's intention to foreclose under power of sale. On March 16, 2009, the notice of intention of foreclosure was properly filed at the Bureau of Conveyances by IndyMac on behalf of Deutsche Bank as the holder of the note. The notice offered Hungate's property for sale with a quitclaim deed and made no warranties.

         Deutsche Bank retained Rosen, a Hawai'i-licensed attorney, to conduct the foreclosure of Hungate's property. Deutsche Bank followed the non-judicial foreclosure process set forth in HRS § 667 Part I.[4]

         To begin the non-judicial foreclosure process, Rosen published a notice of sale in The Garden Island, a newspaper of general circulation, as required by former HRS § 667-5(a) (1) (Supp. 2008). Under HRS § 667-5(a) (1), the attorney must publish the notice of the mortgagee's intention to foreclose "once in each of three successive weeks . . . in a newspaper having a general circulation in the county in which the mortgaged property lies[.]" In compliance with this requirement, Rosen published a notice of sale once a week for three weeks on March 20, March 27, and April 3, 2009. The notice of sale stated a sale date of April 17, 2009.[5]

         Rosen then postponed the sale a total of four times in 2009: from April 17 to May 15, from May 15 to June 12, from June 12 to July 17, and from July 17 to August 14. These dates were never published. Whether the postponement was publicly announced to the bidders who attended each sale date, as required by HRS § 667-5(d), is contested.

         At the August 14, 2009 sale, Deutsche Bank was the sole bidder with a winning credit bid of approximately $161, 250. This amount was substantially below the market value of Hungate's property. A "Mortgagee's Grant Deed Pursuant to Power of Sale" was recorded at the Bureau of Conveyances on October 30, 2009 by Deutsche Bank.

         B. Procedural History

         On August 6, 2013, Hungate filed his initial complaint against Rosen and Deutsche Bank. Hungate contended that Deutsche Bank and Rosen wrongfully conducted the foreclosure of Hungate's property by (1) advertising a proposed sale date 28 days after the date of the first published notice, when HRS § 667-7[6] required that the sale date be at least 29 days after the first published notice; (2) failing to publicize the postponed sale date, in violation of the mortgage's power of sale clause; and (3) breaching their common law duty to secure the best possible price for the property. Hungate also argued that Deutsche Bank and Rosen violated HRS § 480-2[7] because their actions constituted unfair and deceptive trade acts or practices and resulted in unfair methods of competition.

         Rosen filed a motion to dismiss under HRCP Rule 12(b)(6). Rosen argued (1) the initial sale date was scheduled after the expiration of four weeks, when including the date first advertised, and thus he complied with HRS § 667-7; (2) publication of a sale postponement notice was not required by HRS § 667-5(d)[8] or the mortgage;[9] and (3) Rosen is not liable to Hungate because Rosen did not owe a duty of care to Hungate, a non-client.

         On November 5, 2013, the circuit court granted Rosen's motion to dismiss.[10] The court ruled that (1) Rosen complied with HRS §§ 667-5 and 667-7 as a matter of law; (2) HRS § 667-5(d) and the power of sale clause of the mortgage did not require publication of the postponement of the non-judicial foreclosure sale; (3) Hungate lacked standing to assert claims under HRS chapter 480; and (4) Hungate's common law claims were foreclosed because Rosen did not owe a duty to Hungate.

         On December 19, 2013, Hungate filed his first amended complaint against Rosen and Deutsche Bank. The claims were nearly identical to those alleged in the initial complaint.[11]

          Deutsche Bank filed a motion to dismiss the first amended complaint, making arguments similar to those presented by Rosen.

         On April 8, 2014, the circuit court granted in part[12]Deutsche Bank's motion to dismiss Hungate's first amended complaint. As with its prior dismissal of Hungate's August 6, 2013 complaint, the court ruled that (1) Deutsche Bank complied with the notice requirement under HRS §§ 667-5 and 667-7 as a matter of law, and (2) HRS § 667-5(d) and the power of sale clause did not require that postponements of sale be published.

         After appealing to the Intermediate Court of Appeals, the parties filed applications for transfer that were subsequently granted by this court.

         II. Standards of Review

         A. Motion to Dismiss

         The circuit court's grant of a motion to dismiss is reviewed de novo. Kamaka v. Goodsill Anderson Quinn & Stifel, 117 Hawai'i 92, 104, 176 P.3d 91, 103 (2008), as amended (Jan. 25, 2008). Further, the appellate court must accept the allegations made in the complaint as true and "view them in the light most favorable to the plaintiff[s]; dismissal is proper only if it 'appears beyond doubt that the plaintiff[s] can prove no set of facts in support of [their] claim[s] that would entitle [them] to relief.'" Wong v. Cayetano, 111 Hawai'i 462, 476, 143 P.3d 1, 15 (2006)(citations omitted). "However, in weighing the allegations of the complaint as against a motion to dismiss, the court is not required to accept conclusory allegations on the legal effect of the events alleged." Pavsek v. Sandvold, 127 Hawai'i 390, 403, 279 P.3d 55, 68 (App. 2012) (citation omitted).

         B. Statutory Interpretation

         Statutory interpretation is reviewable de novo. Citizens Against Reckless Dev. v. Zoning Bd. of Appeals, 114 Hawai'i 184, 193, 159 P.3d 143, 152 (2007). When construing statutes, the court is governed by the following rules:

First, the fundamental starting point for statutory interpretation is the language of the statute itself. Second, where the statutory language is plain and unambiguous, our sole duty is to give effect to its plain and obvious meaning. Third, implicit in the task of statutory construction is our foremost obligation to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from the language contained in the statute itself. Fourth, when there is doubt, doubleness of meaning, or indistinctiveness or uncertainty of an expression used in a statute, an ambiguity exists.
When there is ambiguity in a statute, "the meaning of the ambiguous words may be sought by examining the context, with which the ambiguous words, phrases, and sentences may be compared, in order to ascertain their true meaning." Moreover, the courts may resort to extrinsic aids in determining legislative intent, such as legislative history, or the reason and spirit of the law.

Id. at 193-94, 159 P.3d at 152-53 (citations omitted).

         C. Interpretation of Contracts

         "[T]he construction and legal effect to be given a contract is a question of law freely reviewable by an appellate court." Hawaiian Ass'n of Seventh-Day Adventists v. Wong, 130 Hawai'i 36, 45, 305 P.3d 452, 461 (2013)(citation omitted).

         III. Discussion

         Taking the facts alleged in Hungate's complaints as true, the circuit court improperly dismissed Hungate's initial complaint and first amended complaint. In reaching this conclusion, we assess Hungate's claims against Deutsche Bank and Rosen, respectively.

         In Part A, we hold the circuit court erred in dismissing the majority of Hungate's claims against Deutsche Bank regarding the alleged HRS chapter 667 Part I violations. Additionally, we conclude the mortgage's power of sale clause required Deutsche Bank to publish all postponements of the foreclosure sale. Regarding Hungate's HRS chapter 667 Part I claims against Rosen, we conclude that the statute required Rosen (1) to give proper notice of the sale date under former HRS § 667-7 and (2) to give notice of the postponements of the sale in accordance with the mortgage's power of sale clause per former HRS § 667-5. However, we hold that those statutory provisions do not create a private right of action against the attorney of a foreclosing mortgagee. We conclude Hungate does not have a cause of action against Rosen under former HRS § 667- 5 and his claims against Rosen based upon the mortgage's power of sale clause cannot stand.

         In Part B, we determine that Deutsche Bank had a common law duty to Hungate to use reasonable means to obtain the best price for Hungate's property. In Part C we hold that the circuit court erred in dismissing Hungate's unfair or deceptive acts or practices claim ...


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